Inge Lamprecht
3 minute read
22 Feb 2018
6:21 am

VAT increases to 15%, but good news for students in budget

Inge Lamprecht

To limit the impact on poor households, the current zero-rating on basic foodstuffs such as maize meal, brown bread and rice will remain in place.

Image courtesy Stock.xchnge

1. VAT increased from 14% to 15%

Government will raise the lion’s share of the R36 billion in additional taxes in 2018-19 through a one percentage point hike in the VAT rate. This is expected to contribute roughly R23 billion to the fiscus.

To limit the impact on poor households, the current zero-rating on basic foodstuffs such as maize meal, brown bread and rice will remain in place. Vulnerable households will also be compensated through an above-average increase in social grants, while some relief will be provided for lower-income individuals through an increase in the bottom three personal income tax brackets and the rebates.

The increase will take effect on April 1, 2018.

2. No inflation adjustment for four wealthiest income tax brackets

Government will raise almost R7 billion through lower-than-inflation increases to personal income tax brackets and rebates.

High income earners will bear the brunt of these increases – while the bottom three personal income tax brackets, as well as the primary, secondary and tertiary rebates will be partially adjusted for inflation through a 3.1% increase, the top four brackets will remain unchanged.

3. No wealth tax, but…

Malusi Gigaba announced an increase in the ad valorem excise duty rate on luxury goods from 7% to 9%, effective April 1, 2018.

According to the Budget Review, these duties apply to “goods that are consumed mainly by wealthier households (such as cosmetics, electronics and golf balls)”.

Estate duty will also increase from 20% to 25% for estates of R30 million or more.

This will take effect on March 1, 2018.

4. No change to capital gains or dividend taxes

5. Higher fuel levies

The general fuel levy will increase by 22 cents per litre while the Road Accident Fund levy will rise by 30 cents per litre. This will take effect on April 4.

6. Medical tax credit remains in place, but…

Medical tax credits will only increase from R303 to R310 per month for the first two beneficiaries (2.3%), and from R204 to R209 per month (2.5%) for the remaining beneficiaries.

7. Smokers and drinkers pay more

Excise duties on tobacco products will increase by 8.5%, and those on alcohol between 6% and 10%.

8. Economic growth outlook improves, but remains lacklustre

National Treasury revised its GDP growth projection for 2017 from 0.7% to 1%. It anticipates growth of 1.5% in 2018, compared to 1.1% in the Medium-Term Budget Policy Statement.

9. Turnaround plan for stateowned companies (SOCs)

A reform programme for SOCs, which will consider their role in economic development. Government will have to provide financial support to several SOCs which could be done through a combination of disposing of non-core assets, strategic equity partners, or direct capital injections.

10. Roughly R57 billion allocated to free tertiary education over medium term

All new first-year students with a family income below R350 000 a year at universities and TVET colleges this academic year will be funded for the full cost of study.

This will be rolled out in subsequent years until all years of study are covered.

Returning NSFAS students at university will have their loans for 2018 onwards converted to a bursary.

New focus on VAT rate hike

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